MAN cautions NPA on consequences of 15% port charge hike on real sector

Manufacturers Association of Nigeria (MAN) has warned that the Nigerian Ports Authority’s (NPA) proposed 15% increase in port charges will exacerbate the challenges faced by the real sector.

Director General MAN, Segun Ajayi-Kadir, mni gave the warning in a position paper adding that the manufacturing sector is already struggling with rising costs, high rate of foreign exchange, astronomical energy costs, and general economic uncertainties.

He described the Ports as the gateway to international trade and play a crucial role in the efficiency and cost-effectiveness of business operations.

According to the United Nations Conference on Trade and Development (UNCTAD) 80% of Nigeria’s traded goods are transported by sea, with 70% of total imports and exports in West and Central Africa destined for Nigeria, which underscores the critical role Nigerian ports play in facilitating trade and industrial productivity.

Ajayi-Kadir, highlighted that for manufacturers, port-related charges constitute significant indirect costs, as most raw materials and industrial machinery are imported through these ports, stressing that any increase in charges will have a ripple effect, leading to higher production costs, increased inflationary pressures, and reduced competitiveness of locally manufactured goods.

“Many manufacturers who operate as tenants in NPA facilities will also face escalated costs, which could significantly disrupt the slight moderation in the mounting challenges that has bedeviled the manufacturing sector in recent times.

He argued that increasing port tariffs would lead to higher production costs, reduced competitiveness, and potential job losses and proposed alternative approaches to revenue generation, including reducing port congestion and inefficiency, addressing high demurrage charges, investing in infrastructure, and adopting competitive pricing strategies.

The association harped on the need for the NPA to engage in stakeholder dialogue to explore sustainable solutions that balance revenue needs with the interests of manufacturers and the broader economy.

DG MAN said “Nigeria’s current economic climate is characterized by rising inflation, foreign exchange challenges, and declining industrial capacity utilization. Many businesses are experiencing worrying downturn due to unsustainable operating costs. Increasing port tariffs is therefore ill-timed and could signal a departure from government’s avowed efforts and commitment to the ease of doing business. It is inevitable that this additional strain on industrial activities will ultimately lead to reduce capacity utilization and possibly job losses.

“Neighbouring countries with more efficient and cost-effective ports will become far more attractive alternatives, leading to increased cargo diversion. This will not only reduce revenue for the Nigerian government but will encourage smuggling and other untoward trade practices that weaken our economy.

“While we acknowledge the need for revenue generation, increasing port tariffs could be counterproductive in the long run. The real issues affecting port revenue include are, reducing turnaround time for vessels and improving cargo clearing processes can significantly boost revenue. Addressing bureaucratic bottlenecks that delay cargo clearance will ensure faster throughput and more efficient revenue collection, improving port infrastructure will enhance operational efficiency and attract more business, leading to natural revenue growth.

“Instead of raising tariffs, aligning Nigerian port charges with global best practices will encourage more trade volume and increase overall earnings. We implore the NPA to shelve the proposed 15% tariff increase and instead, collaborate with stakeholders to explore sustainable alternatives for revenue generation”.

The Association advocate for caution and deep reflection on the part of the NPA, as a key stakeholder in Nigeria’s economic development, noting that NPA’s consultation with key economic actors after it has decided on the increase is tantamount to putting the cart before the horse and does not demonstrate goodwill.

“We call on NPA to rescind the planned increase in order to avert a monumental downturn in the fortunes of businesses in Nigeria. The manufacturing sector can ill-afford such an increase at this time; it runs against the present administration’s efforts at making Nigeria a trading hub in the West African sub-region, and would definitely constitute a drag in the efforts of government to stabilize the economy in the year 2025”, he cautioned.